Correlation Between Good Vibrations and Nike

Can any of the company-specific risk be diversified away by investing in both Good Vibrations and Nike at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Good Vibrations and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Good Vibrations Shoes and Nike Inc, you can compare the effects of market volatilities on Good Vibrations and Nike and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Good Vibrations with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Vibrations and Nike.

Diversification Opportunities for Good Vibrations and Nike

-0.44

Correlation Coefficient

Good Vibrations  Nike

Very good diversification

The 3 months correlation between Good and Nike is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Good Vibrations Shoes and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Good Vibrations is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Good Vibrations Shoes are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Good Vibrations i.e., Good Vibrations and Nike go up and down completely randomly.

Pair Corralation between Good Vibrations and Nike

Given the investment horizon of 90 days Good Vibrations Shoes is expected to generate 7.76 times more return on investment than Nike. However, Good Vibrations is 7.76 times more volatile than Nike Inc. It trades about 0.2 of its potential returns per unit of risk. Nike Inc is currently generating about -0.15 per unit of risk. If you would invest  0.18  in Good Vibrations Shoes on October 9, 2024 and sell it today you would earn a total of  0.28  from holding Good Vibrations Shoes or generate 155.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Good Vibrations Shoes  vs.  Nike Inc

Good Vibrations Shoes

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Good Vibrations and Nike

The main advantage of trading using opposite Good Vibrations and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Vibrations position performs unexpectedly, Nike can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nike will offset losses from the drop in Nike's long position.

The idea behind Good Vibrations Shoes and Nike Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.